Gold Futures Inch Lower Amid Wavering Demand

By Johanna Bennett

Gold futures inched lower on Wednesday on signs of waning investor demand for the metal as an alternative asset. The most actively traded contract, for December delivery, recently fell $1.20, or 0.09% at $1,284 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold prices rallied Tuesday, after Kiev released videotaped interrogations of Russian soldiers it said had been captured on its territory just ahead of talks between Russian President Vladimir Putin and Ukraine President Petro Poroshenko. Moscow played down the allegations, saying the soldiers ended up in Ukraine likely by accident.

Some investors buy gold during bouts of political unrest, betting that precious metal will retain its value better than other assets. Still, many market watchers say gold shouldn’t make a big move before October, when the Fed is expected to end its stimulus effort. Prices rose 6.9% his year through yesterday as violence in Ukraine boosted demand for a haven asset.

Gold, like other commodities, costs money to hold and doesn’t pay interest. That makes it less attractive than bonds or other investments that pay interest when rates are climbing.

The WSJ reports:

Gold traders had a sense of certainty throughout much of 2014 that the Fed would continue to reduce its monthly bond purchases by $10 billion increments. The final such cut comes in October, paving the way for the central bank to raise interest rates for the first time in years. The Fed has signaled that it is prepared to raise rates if the economy continues to rebound at a faster-than-expected pace, but is also willing to leave policy unchanged or step in with more help should growth slow.

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